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On 11 April 2022, the International Ethics Standards Board for Accountants (IESBA) released a revised definition of a PIE together with other revised provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence.

Accordingly, an entity would be treated as a Public Interest Entity (PIE) when it falls within any of the following categories:

  1. A publicly traded entity;
  2. An entity one of whose main functions is to take deposits from the public
  3. An entity one of whose main functions is to provide insurance to the public or
  4. An entity specified as such by law, regulation, or professional standards.

Further, a public traded entity is defined as an entity that issues financial instruments that are transferrable and traded through a publicly accessible market mechanism, including through listing on a stock exchange, for example, a listed entity as defined by relevant securities law or regulation.

To recognise diversity in jurisdictional contexts, IESBA has taken a novel approach of expanding the PIE definition globally at a high level while providing guidance to regulators, national standard setters and other relevant local bodies on tailoring the broad definition for jurisdictional specificities.

Effective date: The pronouncement will be effective for audits of financial statements for periods beginning on or after 15 December 2024. Early adoption is permitted and encouraged.

To access the text of the pronouncement, please click here

Action Points for Auditors

  • The ICAI Code of Ethics applicable to all chartered accountants in India has been aligned with the International Code of Ethics issued by IESBA. Thus, the proposals issued by IESBA are likely to be considered by ICAI. The proposals suggested by IESBA would be effective for audits of financial statements for periods beginning on or after 15 December 2024. Thus, in order to ensure smooth transition to the new requirements, auditors must engage with the management and those charged with governance of their clients regarding the potential impacts of the proposals on independence requirements of the entity.
  • The IESBA coordinated the development of these revisions closely with the IAASB, given that some of the terms and concepts that were considered are common to both Boards’ standards. The IAASB is pursuing a project to consider a number of matters relevant to its standards arising from the finalisation of the IESBA’s PIE provisions, including whether and how to address the transparency requirement noted above in the IAASB’s standards. Auditors should watch this space for further updates in ISQMs and ISAs.
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August 2022

On 28 April 2021, the International Ethics Standards Board for Accountants (IESBA) made revisions to the Non-Assurance Service (NAS) provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). The revised provisions include certain new requirements that expressly prohibit firms and network firms from providing certain types of NAS to their audit clients, especially when they are Public Interest Entities (PIEs). In this regard, IESBA staff released a Questions and Answers (Q&As) publication for explaining the key revisions to the NAS provisions of the Code. The publication comprises of the following five sections:

  1. General prohibitions and applying the conceptual framework to NAS,
  2. Applying provisions relating to a self-review threat to independence, including when providing advice and recommendations to an audit client,
  3. Provisions relating to specific types of NAS,
  4. Firm communication with Those Charged With Governance (TCWG) about NAS, and
  5. Other matters.

Some of the key issues and revisions to the NAS provisions discussed in the publication include prohibition on assuming management responsibility when providing NAS to an audit client, identification and evaluation of threats to independence in relation to providing NAS to audit clients, additional considerations required in cases where multiple NAS are provided to the same audit client, exceptions to self-review threats and so on.

To access the text of the publication, please click here

Action Points for Auditors

  • The revised NAS provisions are effective for audits of financial statements for periods beginning on or after 15 December 2022. While similar provisions have not been included in the code of ethics issued by ICAI and applicable to audit firms in India, auditors undertaking assignments involving reporting to a parent entity/regulator outside India may need to comply with these provisions. Auditors may refer this publication to understand the entity-specific situations and events illustrated with the help of examples.
  • In line with the revisions being made to the Code, IAASB is pursuing a project to consider a number of matters relevant to the International Standards on Auditing, including whether and how to address the transparency requirements. Auditors should thus, watch this space for further developments.
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